There is no such thing as “acknowledgment” of a contract from a legal point of view. Contracts are formed by offer and acceptance alone. That form contracts in Oregon contain an “acknowledgment” clause is a misunderstood accident of history – not a legal requirement. Only in Oregon has “acknowledgment” become intertwined with offer and acceptance.
Years ago, the Real Estate Agency, in a effort to force better recordkeeping, adopted a number of administrative rules dealing with offers. These rules, now codified in OAR 863-015-0135, demanded, among other things, that licensees give buyers copies of their offers as well as copies of the seller’s response to the offer even if the response is rejection. Click here for a copy of OAR 863-015-0135. Soon thereafter, real estate sale forms in Oregon began to include “acknowledgment” clauses.
The original idea of an acknowledgment clause was to create proof that real estate agents had provided the buyer with a copy of the seller’s response to the buyer’s offer as required by administrative rule. Acknowledgment was a matter of agent recordkeeping and had nothing whatever to do with formation of the contract. The acknowledgment clause was placed below the signatures of parties so as not to be confused with a term of the contract itself. That approach evidently was too simple because confusion is exactly what resulted.
Two major contract formation myths have grown up around the acknowledgment clause. The first, that there is no contract until the buyer signs the acknowledgment, is pure myth. The exact origin of the acknowledgement myth is lost in time but the most likely origin is a court case where a lawyer used the buyer acknowledgment signature not to prove a contract existed but to satisfy the more narrow requirements of the Statute of Frauds. Click here for a detailed discussion of the Statute of Frauds. Whatever the origin of the myth, there is no such thing as “acknowledgment” of acceptance in contract law.
The other major contract formation myth that has grown up around acknowledgment involves using acknowledgment as acceptance when a seller makes changes to an offer or “accepts” the offer after it has expired. Unlike the pure myth that acknowledgment is required to form a contract, the myth that acknowledgment can be used in place of acceptance has at least some legal traction. As we know from the discussion of acceptance, intent plays a large role in acceptance. It follows that an acknowledgment clause signed with the proper intent could be evidence of acceptance.
The problem with using an acknowledgment clause as evidence of acceptance is that such clauses typically contain no words of promise. Because of its recordkeeping origin, the Oregon acknowledgment clause, in its original form, simply said “Buyer acknowledges receipt of a copy of Seller’s written response to this Agreement.” Acknowledging receipt of a copy of response says nothing about the buyer agreeing to the contents of the response – just that they got a copy of the response, whatever it was. The acknowledgment clause, therefore, was as originally written poor evidence of acceptance of changes to an offer or late acceptance.
Notwithstanding the contract formation problems inherent in using acknowledgment to prove acceptance, the practice proved too convenient to forego. It became standard practice for agents to consider the buyer’s acknowledgment as evidence of their acceptance of alterations to the buyers’ offer or the seller’s late acceptance. By the time it was called into question by attorneys, the practice of using acknowledgment for the buyer’s acceptance when the seller “accepts” the offer after it has expired was so widespread that the acknowledgment clause was changed to accommodate the practice.
An unintended consequence of changing the acknowledgment clause to accommodate late acceptance by the seller has been to perpetuate confusion. The pure myth that acknowledgment is “required” before there is a real estate contract continues in the industry notwithstanding a complete absence of legal support. Now that the acknowledgement clause actually is used for acceptance in the case of expired offers, you can expect acknowledgment myths to survive well into the future.
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